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Market report: Friday, March 18

Business

The Australian market looks set to open higher following a strong lead from Wall Street in the wake of this week’s lower interest rate projections by the Federal Reserve.

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At 6.45am (AEDT) on Friday, the share price index was up 34 points at 5,204.

Locally, in economic news on Friday, Reserve Bank of Australia head of Financial Stability Luci Ellis is scheduled to speak at the Financial Risk Day 2016 conference in Sydney.

In equities news, Premier Investments is slated to release half year results.

In Australia, the market on Thursday lifted by nearly one per cent after the US Fed left its key interest rates unchanged and Australia’s unemployment rate fell to 5.8 per cent.

NEW YORK – The S&P 500 and the Dow Jones industrial average have turned positive for the year, a day after the US Federal Reserve signalled fewer interest rate hikes for the year.

The Fed’s dovish stance weighed on the US dollar, which catapulted commodity prices to their highest levels this year.

The best performing sectors in the S&P 500 were materials and energy.

“It’s a continued reaction from the Fed’s move yesterday,” said David Lefkowitz, senior equities analyst at UBS Americas Wealth Management in New York.

The Fed on Wednesday pointed to moderate US economic growth and strong job gains but cautioned about risks from an uncertain global economy.

The central bank pointed to the possibility of two more rate hikes before the end of the year, having laid out four hikes in 2016 when it raised rates in December.

The Dow Jones industrial average was up 181.96 points, or 1.05 per cent, to 17,507.72; the S&P 500 had gained 15.59 points, or 0.77 per cent, to 2,042.81 and the Nasdaq Composite had added 11.60 points, or 0.24 per cent, to 4,775.57.

LONDON – UK shares have edged higher, outperforming their European counterparts, as miners were boosted by a weaker dollar after the US Federal Reserve’s dovish decision to hold interest rates steady.

A fall in the US dollar pushed shares in British commodities stocks higher as dollar-priced crude oil and metals became cheaper for holders of other currencies.

The FTSE 100 index rose 25.63 points, or 0.3 per cent to 6,201.12 points by the close on Thursday, outperforming steeper falls in euro zone shares.

Miners were the top sectoral gainers on the blue-chip index, with the FTSE 350 Mining index jumping 7.5 per cent as the price of copper rallied to a four-month high.

The index was unmoved by the Bank of England’s decision to keep rates steady, with policymakers adding that sterling had been dealt a big hit by uncertainty in the run-up to the referendum on EU membership.

HONG KONG – Hong Kong shares finished higher on Thursday after the Federal Reserve reduced the number of expected interest rate hikes this year, buoying global equities.

The Hang Seng index rose 1.2 per cent to 20,503.81 points, while the China Enterprises Index gained 2.4 per cent to 8,773.83.

Total trading volume of companies included in the HSI index was 1.7 billion shares.

WASHINGTON – The number of Americans filing for unemployment benefits rose from a five-month low last week, but remained below a level associated with a strengthening labor market.

Average long-term US mortgage rates rose this week for the third straight week.

ENERGY

Brent oil has jumped 2.7 per cent to $US41.41 as a number of large producers agreed on a date to discuss an output freeze. US crude rose 4.6 per cent to $40.22.

“The remote possibility that a co-ordinated supply control effort comes from this meeting, assuming it even happens, has put market bears on the defensive,” said Pete Donovan, broker with Liquidity Energy in New York.

PRECIOUS METALS

Gold has turned lower, consolidating from a 2.5 per cent surge in the previous session when the Federal Reserve cut the number of interest rate rises it forecasts for this year, sending the dollar sharply lower.

The US central bank held interest rates steady and indicated it would tighten policy this year, but fresh projections showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.

Spot gold was down 0.4 per cent on Thursday at $US1,257.11 an ounce in afternoon trade after climbing 0.7 per cent to $US1,270.90.

“Yesterday was the excitement. Today is more the consolidation phase,” said James Steel, chief metals analyst for HSBC Securities in New York, referring to the prior session’s rally in response to the Fed’s dovish statement.

BASE METALS

Copper has jumped to its highest in more than four months, boosted by signs from the US Federal Reserve it will not raise rates to the extent flagged last year, falling inventories and higher stock markets.

Benchmark copper on the London Metal Exchange was untraded at the close on Thursday, but bid up 2.7 per cent at $US5,069.50 a tonne after hitting $US5,074 earlier in the session, its highest since November 5.

In December, about four rate rises were expected this year but the majority of Fed policymakers now say it would be appropriate to raise rates by about a half a percentage point by the end of 2016.

The shift in stance undermined the US currency, making dollar-denominated commodities cheaper for non-US firms, which is a relationship used by funds to generate buy, sell signals using numerical models.

STOCKS TO WATCH ON THE AUSTRALIAN STOCK EXCHANGE ON FRIDAY:

BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO: Shares in the mining giants could benefit from an overnight lift in the iron ore price, while Rio Tinto boss Sam Walsh has announced he will step down in July.

ORG – ORIGIN ENERGY

STO – SANTOS

WPL – WOODSIDE PETROLEUM

Energy companies may see their shares extend gains after oil prices jumped overnight, with WTI gaining 4.6 per cent and Brent up 2.7 per cent.

MYR – MYER: Retailer Myer will be in focus after its shares rose nearly 13 per cent on the back of strong sales growth in the half year and it firmed up its full year profit outlook.

AAP

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